The Competition Commission taking steps to level the playing field for Online Platforms
01 Sep 2023
As we continue to move into the digital era, it is important that legislation and regulations keep up with these changes, while simultaneously facilitating fair competition between digital giants and tech start-ups. However, it takes a while for the legislature to implement frameworks addressing any changes, with all the red tape involved.
It is therefore exciting to see (especially for tech start-ups) that the Competition Commission has taken its obligations seriously, and published its final Online Intermediation Platform Market Inquiry Report on 31 July 2023, after a two-year investigation into the operations and practices of Online Intermediation Platforms, better known to you and me as online shopping and delivery apps.
The Commission initiated the Online Intermediation Platform Market Inquiry in May 2021, in terms of section 43B(1)(a) of the Competition Act 89 of 1998 (as amended), to establish whether business-to-consumer online intermediation platforms (in particular eCommerce, online travel agencies, food delivery, app stores, and property/automotive classifieds), and search engines, had features that may impede, distort, or restrict competition, or may negatively impact the participation of small and medium enterprises as well as historically disadvantaged persons.
The Commission acknowledged that online intermediation platforms may not be the only distribution channel for business users to reach consumers to sell their products or services. However, the convenience of a single aggregator where the consumer can easily search and compare products and services, along with the convenience of transacting from anywhere at anytime, has a significant and unique appeal to consumers, and the advantage for business users is a platform that grants national (or international) market access to consumers and online sales.
Key findings and remedial action
The report set out remedial actions for a number of our favourite (or most hated) platforms, such as Google, Booking.com, Takealot, Apple, Uber Eats, Mr D Food, Property24, Private Property, AutoTrader, and Cars.co.za.
As part of the report, the inquiry released a summary of the findings and remedial actions, to aid consumers that use, and businesses that list on, these platforms to understand the impact of the findings and remedial actions, and how those remedial actions should benefit them.
As per the media statement issued by the Commission with the release of the report, some of the findings and remedial actions were that:
- Google Search is a critical gateway to consumers for all platforms, and its business model of paid search results, alongside free results, favours large established platforms (who can afford to pay for their search results to appear at the top of the list). Google is required to provide a South African badge and search filter to aid consumer support for South African platforms, and to introduce a new platform sites unit to display smaller South African platforms relevant to the search, and implement any changes it makes in Europe to address self-preferencing in South Africa. In addition, Google must provide training and R180m in advertising credits to these smaller South African platforms.
- Booking.com’s restrictions on hotel pricing on other online channels limits competition and creates a dependency that is used to extract higher commission fees. Booking.com is required to remove the restrictive pricing clauses from its contracts.
- Takealot faces a conflict of interest on its site, as its own retail division competes with third party marketplace sellers, leading to behaviour that has disadvantaged the third party sellers. Takealot has to segregate its retail division from its marketplace operations, prevent its retail services division from accessing third party seller data, and stop unilaterally preventing third party sellers from competing for certain brands, where Takealot has ‘exclusivity’.
- Google Play and Apple App stores are unconstrained in the commission fees they charge app developers, and their global business model limits the curation and visibility of South African-paid apps. These apps are required to stop preventing apps from directing consumers to pay on the app’s own website, and must ensure continued free use by consumers of content purchased from those websites, along with local app curation.
- Uber Eats and Mr D Food’s practices disadvantage their competitors by the lack of transparency on menu surcharges across platforms, and restrictions placed on franchisees by national restaurant chains. Consumers must be informed by food delivery platforms that they charge restaurants a commission fee, and menu items may be priced differently to takeaway menus. Restaurant chains may not unreasonably restrict the choice of food delivery service by franchisees.
- Property24 and Private Property’s practices hinder their competitors by the lack of interoperability in providing property listings, and small estate agents and automotive dealers are disadvantaged by the discriminatory pricing that favours large national groups. These platforms must substantially reduce the price of listings to small and medium independent agencies and dealers. Property classifieds are required to put in place the ability for estate agencies to share their listings with other classifieds providers.
The Commission has given all affected platforms time to implement the remedial actions, depending on the complexity of the remedy. The detailed Remedial Action decisions, with the specific requirements and phase-in periods, are set out in Annexure 10 of the Final Report and Summary, which can be accessed at https://www.compcom.co.za/online-intermediation-platforms-market-inquiry-final-report-launch/.
While the intention of the Commission is to facilitate growth of smaller platforms, promote fair competition, ensure inclusivity and ultimately an enhanced customer experience, we will have to wait and see whether the affected platforms implement the remedial actions, and pass the benefits through to the smaller South African businesses, and ultimately, the consumer.
Any multinational operators and start-ups wanting to enter the South African market will also need to take the report into consideration when setting up their local operations.
Article sourced from Eversheds Sutherland.
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